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Executives

Chaela Volpe - Investor Relations Manager

Thomas Clarke - Chairman and Chief Executive Officer

Eric Ashman - Chief Financial Officer

Analysts

William Morrison - ThinkEquity

Mark May - Needham

Richard Fetyko - MCF & Company

Colin Gillis - Canaccord

Sameet Sinha – JMP

George Grose - American Capital Partners

Ross Sandler - RBC

TheStreet.com (TSCM) Q1 2008 Earnings Call April 29, 2008 11:00 AM ET

Operator

Good day, ladies and gentlemen and welcome to TheStreet.com first quarter 2008 earnings conference call. (Operator Instructions) I will now turn the presentation over to Miss Chaela Volpe, Investor Relations Manager. Please proceed, ma’am.

Chaela Volpe

Thank you. Some of the statements made on this earnings call not related to historical facts may be deemed to be forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements, which may concern TheStreet.com’s financial performance as well as its strategic and operational plans, are subject to risks and uncertainties that could cause actual results to differ. The company undertakes no duty to update any such statements.

The risks and uncertainties are described in the company’s SEC filings, which are on file with the SEC and available at its website at www.SEC.gov. Additional information will also be set forth in TheStreet.com’s quarterly report quarterly report on Form 10-Q for the quarterly period ended May 31, 2008 which will be filed with the SEC in the near future.

I will now turn the call over to Tom Clarke, TheStreet.com’s Chairman and Chief Executive Officer.

Thomas Clarke

Thanks, Chaela and good morning. Thank you for joining us today to review our first quarter 2008 financial results. I’d like to review our progress on several strategic initiatives during the quarter and then turn the call over to our CFO Eric Ashman who will review our Q1 financial results in detail.

As we mentioned on last quarter’s call, we began the year with a very aggressive agenda. We entered 2008 with the exciting launch of a redesigned TheStreet.com website and the launch of a brand new website, MainStreet.com. The enhancements to TheStreet.com have been met with enthusiasm and the site is delivering the superior visitor and advertiser experience we aimed to create when we began the redesign project a year ago.

User engagement as defined by time spent on the site has increased 18% over the same period last year and 6% sequentially; our revenue per thousand page views came in at $26.84, a 52% increase over the first quarter of last year and a 5% increase over the fourth quarter, historically the strongest quarter of the year.

Along with additional and better advertising placements, the redesigned site has allowed the ad sales team to sell customized sponsorships in collaboration with the promotions team. The trend among advertisers is that they are requesting we participate more strategically in the creation of their ads. These custom ad sponsorships provide the advertiser with a more integrated program where they run targeted content relevant to their message, creating better awareness and response from our readers.

These deals are structured for larger dollar amounts, command higher CPMs and are longer in duration. This is consistent with a recent Booz Allen survey that showed that marketers think that media companies are their most important partners going forward.

We are really excited by the buzz that MainStreet has created in the few months since it launched, including receiving a Webby Award nomination for Best Business Blog in 2008. The broader audience that MainStreet attracts allowed us to launch with a national advertising sponsor and our traffic numbers continue to expand as we roll out additional features and enhancements.

As we said back in February in our Q4 call, in order to meet our aggressive goals and the increased demand for our products and services, we ramped up internal investment and resources to capitalize on this trend for 2008. The Promotions.com team successfully led the redesign of TheStreet.com and the development of MainStreet on the heels of their leadership role in the launch of the redesigned Stockpickr website in December.

This rapid pace of growth was not accomplished without some short-term pain. Our bottom line took a hit as we had to divert a portion of the revenue-producing capacity from the Promotions group to accomplish this.

The rationale behind this was grounded in the belief that it was important we have the capacity to meet increased demand while continuing to deliver on our strategic path of diversifying our revenue streams more towards the higher growth marketing services area.

At the end of the quarter our revenue mix was 57% paid services and 43% marketing services, as compared to the 65% paid services and 35% marketing services mix we had at the end of the first quarter in ‘07.

We believe that by delivering on these projects in the first quarter we have better positioned ourselves for improved growth in future quarters. We also believe that in challenging times the landscape among the competition always reshuffles and in order for us to move up we need to fully embrace the opportunity we see for market share growth.

In looking at the Promotions business specifically, we have already started to see the pipeline improve. Unburdened by the weight of the technology demands we put on the organization in the first quarter, its focus on revenue-producing projects has returned. Promotions has expanded its relationship with Kraft and was recently awarded McDonald’s 2008 Monopoly game promotion. Promotions also has created the online sweepstakes in honor of Outback’s 20th birthday and it will work with Verizon on instant win games for Verizon customers. And, it has launched a photo upload contest for Pacific Sunwear.

In addition, we are augmenting Promotions revenue-producing ability with additional sales representatives to handle the increasing demand. To say we remain extremely confident of the long term success of this business would be an understatement.

In looking at the paid services segment of our business, the current environment remains challenging. We recently named David Sterman, an experienced industry veteran, as General Manager of Subscription Services. David will help further fine-tune and expand our product line and we would expect some new offerings by the third quarter of this year. In addition, we will be expanding our affiliate marketing relationships.

Our commitment to further extending our brand in the category of money was most recently evidenced by our investment in Geezeo, a leader in web-based personal finance on an easy to use, social networking-based platform. Geezeo allows users to instantly and automatically track bank accounts and credit card balances as well as investments, mortgages, student loans and auto loans.

In addition to giving users a single platform to access all of their financial information, Geezeo offers a tagging functionality that makes easy to create budgets, track spending, set financial goals and interact with a community dedicated to improving financial habits. Geezeo is a place where audiences from our entire network of websites will come together in an interactive arena to make educated financial decisions.

As we head into the second quarter, we are constantly evaluating what works and what needs to be tweaked in terms of our new sites. As we learned with Stockpickr after its redesign, the SEO component of the redesign takes a few months to fully kick in. In the last five months, traffic on Stockpickr attributed to SEO has increased from 16.7% to 22.3%. On TheStreet.com site we have seen a 12% sequential increase in the percentage of traffic from natural search; remember, the site was relaunched on February 5. These increases support our confidence that we will meet our goal of increasing traffic from SEO to a level consistent with others in our space.

As mentioned in our press release, we continue with our development plan for BankingMyWay. Recent deals with CreditCards.com and Bankaholic will continue to expand both our content and our reach. The MainStreet site has gotten off to a fast start and we will continue to be reactive to consumer needs as we add additional features like the recently added financial horoscopes, Cramer’s Charity Picks and expanded video capabilities. Of course, we will continue to be opportunistic in continuing our expansion in the money category.

At this point I would like to turn the call over to Eric for a detailed look at our financial results for the quarter.

Eric Ashman

Thanks, Tom. As we discussed in our fourth quarter earnings call back in February, the story of the first quarter of 2008 was one of investment as we continue to build out our network of websites to capitalize on the growing demand across our properties from our expanding roster of financial and non-financial advertisers.

We brought all of our resources to bear to ensure that the relaunch of the redesigned TheStreet.com in February, along with the launch of MainStreet and the reskin of BankingMyWay in the same month, would deliver us a more robust platform to drive revenue growth throughout the rest of the year while delivering stronger margins to our increasingly scalable infrastructure.

Against the backdrop of all of this activity, we delivered total revenue for the first quarter of $18.9 million, an increase of 31% over revenue of $14.5 million reported for the first quarter of 2007. Adjusted EBITDA, excluding stock compensation expense, was $3.9 million, an increase of 11% over adjusted EBITDA of $3.5 million for the first quarter of 2007.

We delivered free cash flow of $3.5 million, an increase of 25% over the $2.8 million in free cash flow we delivered in the first quarter of last year. We ended the quarter with $82 million of cash, restricted cash and cash equivalents and with no bank debt.

Net income attributable to common stockholders for the first quarter of 2008, after deducting preferred stock dividends of approximately $96,000 was $2.4 million or $0.07 per fully diluted share, a decrease of 22% from the $3 million or $0.11 per fully diluted share in the first quarter of 2007.

Turning specifically to our revenue streams, marketing services revenue -- which includes advertising and interactive marketing services -- totaled $8.2 million for the quarter, an increase of 62% over marketing services of $5.1 million recorded for the same period last year.

We delivered advertising revenue totaling $6 million, an increase of 18% over the $5.1 million in prior year. This performance was driven by a record RPM of $26.84, an increase of 52% over the prior year; and by strong growth in revenue from our non-financial advertisers, which increased by 44% as compared to the first quarter of last year representing 40% of total advertising revenue, up from 32% in the first quarter of 2007.

We had a record 32 new advertisers in the quarter, a 60% increase year over year with a total of 104 advertisers in the quarter, a year over year increase of 40%. New advertisers in the first quarter included Shell, Toyota, British Petroleum, Virgin Charter Airlines and United Healthcare, all strong non-financial brands attracted to the strong demographics of our audience and our strengthening capabilities in delivering custom campaigns that meet and exceed advertisers’ expectations.

We had 6.3 million average monthly unique visitors in the first quarter, an increase of 26% over the prior year. As we discussed in the fourth quarter earnings call, the redesigned TheStreet.com site makes greater use of technology such as AJAX, which automatically delivers updated information to many of our pages. As we continue to make changes to story length and other aspects of our site design that impact page views, we believe we will deliver a more engaged user to our advertisers, improving the performance of their campaigns across the network.

While the 222 million page views we served in the first quarter represents a 23% decrease over the same period last year, time spent on TheStreet.com in the first quarter is up 18% from last year and up 6% sequentially from the fourth quarter.

With respect to Promotions.com this quarter, interactive marketing services revenue totaled $2.2 million. As we discussed on the Q4 call, Promotions.com was impacted by our decision to focus the leadership and technical resources of that business on our internal strategic initiatives, which has impacted their own growth in the short term. We believe that this focus and investment will produce significant returns across the network, as we are better able to take advantage of advertiser demand for our growing audience and the custom sponsorship and interactive campaigns we can more effectively deliver.

As Tom mentioned earlier in the call, the redesigned website and the interactive and custom advertising platforms that Promotions.com has brought to our business is proving to be a competitive advantage as we attract new advertisers to our network. Sponsorship campaigns delivered through custom ad units and dedicated content mini sites, such as those targeting small business or travel content, command higher CPMs, higher overall contract values and longer cancellation clauses, delivering on the promise of the Promotions.com acquisition with respect to the growth of our advertising business.

I’ll now turn to the paid services side of our business. Paid services, which includes subscription, syndication, licensing and the information services revenue from the recently acquired RateWatch business, totaled $10.8 million for the quarter, an increase of 14% over the first quarter of 2007.

Our subscription business performed in line with our modest expectations, particularly given the headwinds of a poorly performing stock market which increases the challenges associated with new subscriber acquisition. Subscription revenue, excluding the impact of subscription revenue from TheStreet.com Ratings print directory business, which we outsourced in the second quarter of last year, was $8 million, down 2% from the $8.1 million we delivered in the first quarter of last year.

We had total deferred revenue of $17.5 million at the end of the quarter. Deferred revenue specifically related to TheStreet.com subscription products decreased 1% to $12.8 million from $13 million at the end of the first quarter of last year.

Subscription bookings for the TSC subscription business in the first quarter totaled $8.9 million, a decrease of 9% from the $9.7 million we booked in the first quarter of last year and the number of subscribers decreased by 8% to approximately 82,800.

We are targeting a number of initiatives to reinvigorate the growth in this business, including the planned launch of at least two new subscription products by the third quarter. As we have discussed in the past, we will continue to focus on higher priced, well-differentiated product offerings rather than steep discounting and inexpensive mass market offerings. As a reflection of our efforts in this area, our average annual revenue per subscriber increased by 3% to $378, up from $366 per subscriber in the first quarter of last year.

Syndication, licensing and information services revenue, which includes revenue from the RateWatch business acquired in the fourth quarter of 2007, totaled $2.7 million for the current quarter, an increase of 290% over the same period last year. Excluding the impact of the revenue from RateWatch, syndication and licensing revenue was $1.1 million, an increase of 55% over the prior year.

We continue to make progress with respect to the diversification of our revenue. Marketing services and paid services revenue in the first quarter of 2008 accounted for 43% and 57% respectively of total revenue, compared to 35% and 65% respectively in the first quarter of 2007.

Turning to our margins, as we expected profitability took a short-term hit as we diverted a portion of the revenue-producing capacity from the Promotions.com group to our internal strategic initiatives and invested in content, marketing and additional ad sales staff to support the relaunch of TheStreet.com and the launch of MainStreet, and to prepare ourselves to take advantage of the growing online advertising opportunity before us.

Our first quarter gross margin was 59.6% as compared to 61.2% in the first quarter of last year. Our adjusted EBITDA margin, excluding the impact of non-cash compensation, was 20.4% versus 24% last year.

Sales and marketing expenses increased 17% sequentially over the fourth quarter of 2007. As we discussed on our fourth quarter earnings call, we increased our ad sales team from 15 to 17 in the quarter, allowing us to open new sales offices in Chicago and Los Angeles and bring great new sales experience to the team. We also increased our online and offline marketing spend to support the launch of MainStreet, the ongoing growth to BankingMyWay and the relaunch of TheStreet.com. We’ve been extremely pleased with the results of these efforts so far.

G&A costs increased by 18% sequentially. Almost one-third of this increase related to increased non-cash compensation expense in the first quarter. Additionally, the first quarter is always impacted by annual salary increases, increased payroll taxes that we set on an annual basis and higher healthcare and related benefits cost.

Additionally, in the first quarter of 2008 we incurred approximately $100,000 of temporary staffing costs to support the organization through a period of significant internal operational activity. Those costs will come out of the business in the second quarter.

As we discussed on our fourth quarter earnings call, we expect to deliver sequential margin expansion throughout the rest of this fiscal year as we leverage our first quarter investment with top line revenue growth that will deliver expanding margins across our infrastructure. We also expect to deliver full year gross margin and adjusted EBITDA margin that exceed the margins we delivered in 2007.

With respect to non-cash stock compensation, the recent signing of the new contract with Jim Cramer included the grant of 300,000 restricted shares of stock which will generate additional non-cash compensation expense of approximately $300,000 per quarter from Q2 to the end of 2008 with slightly lower amounts impacting 2009 and 2010.

Additionally, on April 24 we announced a strategic investment in Geezeo, a leader in the web-based personal finance space. This initial $1.2 million investment represents an approximately 13% interest in the company. The investment also includes the option to purchase the company based upon an equity value of $12 million at any point over the next year. We will account for Geezeo under the cost method of accounting with our investment being reflected on our balance sheet in the second quarter.

Finally, this quarter the company began its third year of quarterly dividend rewards of $0.025 per share.

With that, I’ll turn the call back to Tom.

Thomas Clarke

Thanks, Eric. Coming off of record-breaking first quarter revenue and with a record 32 new advertisers, the strategy of broadening our content is having the desired effect with both our audience and our partners. Recent expansion content deals with AOL, Internet Broadcasting and Captivate are all a result of our ability to deliver a more diverse content set.

We began 2008 with momentum, excitement and a strong desire to continue to build out our offerings in the overall category of money. The newest initiatives Eric and I have outlined position us for expansion beyond the focus on just the investment and financial news space. Our recent transactions and launches represent the start of a journey into the overall money space, rather than a final destination for a narrow scope of financial content.

As we all know, the financial media landscape is evolving quickly and we will need to be as nimble, if not more so, than our competitors to remain a leader in this space.

Now I’ll open it up to any questions you may have.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question is from William Morrison - ThinkEquity.

William Morrison - ThinkEquity

Tom, I would characterize the tone of the call as very bullish, yet your results fell below my estimates, and I believe consensus. The stock is trading off about 15%. Can you just describe where you came in? Because you don’t guide -- obviously, estimates are what they are -- but can you describe where the quarter came in relative to your expectations? Was this what you were expecting?

If you could also characterize how business trended specifically in the advertising business through the quarter. So was March stronger than January or vice versa? And then I’ve got a couple of follow-ups.

Thomas Clarke

Bill, it was our conscious decision to really put those resources from Promotions to deliver on both the redesigned Street.com and MainStreet. We thought that was critically important that we deliver that, because the increased demand we were seeing from the ad side as we looked into the future really necessitated that and I didn’t want that to be a hangover going into the second quarter.

Getting to your point, did it meet our expectations or was it where we thought it would be? Yes it was. I mean the non-cash expenses a little bit, you could talk about that, but in general it is exactly where we thought we would be.

As for the advertising, we saw a little bit more strength as we went through the quarter but we may be a little unique in that because again, until the site actually launched on February 5, we showed advertisers, we pre-sold it, but until they could actually see it and see how it worked people were holding, so we did see more strength towards the end of the quarter than we did going into the quarter.

William Morrison - ThinkEquity

So just to be clear, I was not surprised by Promotions, but I had $6.8 million in advertising revenue and you did $6 million, so personally your advertising revenue fell way below my number.

I just want to be clear, your internal plans were for somewhere around $6 million in ad revenue?

Thomas Clarke

Let’s put it this way, Bill. I don’t want to comment on your numbers because we don’t give guidance, but we had 18% growth in the ad business. We are pleased with that. Every time you launch a site you get a couple of bips and bumps here and there, but in general we’re very pleased with the way the ad number came in.

William Morrison - ThinkEquity

You’ve given us guidance that margins should expand through the year. We’ve seen now four online advertising media companies miss their numbers this quarter. The economy could be going into recession, in which case advertising budgets probably pull back in 2Q and/or 3Q. Can you just give us a sense of what kind of revenue growth you’re assuming for the full year to drive margin expansion across the year?

Obviously, if the revenue doesn’t come in with your expectations you may not see the margin expansion. It would be really helpful if you could just give us directionally what you’re counting on or what you’re expecting for revenue growth to get to that margin expansion through the course of the year.

Eric Ashman

Because we don’t give guidance I can’t give you a specific number and I can’t give you a specific percentage in terms of growth for the year. What we are planning on is first of all, what we’re seeing is a lot of demand, particularly for the new properties. What we’re expecting is that even in a market that is down where people are pulling back, to the extent that we can continue to grab share against an expanding audience of unique visitors across the network of sites, that will play into our favor in terms of being able to drive growth in the ad revenue line.

We’ve always had a fairly modest expectation of growth with respect to the subscription business. We think somewhat that is impacted by the performance of the stock market itself and some macroeconomics conditions. But in this quarter, certainly in the first quarter, it played in line with our expectations there. We think that we can make the statement with respect to margin expansion knowing the macroeconomic environment, but also knowing internally that the things that we’ve done in the first quarter position us very well to execute across the rest of the year.

Thomas Clarke

Bill, just to follow up on that a little bit. I think you know we don’t use the environment as any kind of excuse as to where the results or our performance comes on. What we are seeing in the ad market is this: advertisers traditionally have a base spend. So when they come in, they will have a campaign where they’ll spend $300,000. What you’re not seeing -- and I think this is where the ad market gets a little tighter -- you don’t see the incremental spend that you traditionally get at the end of a quarter. It’s hard to judge the outside conditions that are really affecting how that’s going to play on over the next couple of quarters.

But I think as Eric said, what we’re seeing in the demand for our sites and the diversification and the broadening of our audience leads us to believe that we should have advertising revenue increase and we’re feeling pretty good about that.

William Morrison - ThinkEquity

Can you just help us understand the logic on Jim’s new contract? I think Jim himself said on your Analyst Day in December he’s never been less important to the story and to the operations and fundamentals at TheStreet.com than at any time in the past.

I would assume as you grow your non-financial advertiser base, as you grow into new sites that is just going to continue to play out over the next few years. Can you explain the logic of why he should be paid more this year than last year and more next year and the year following from this year?

Thomas Clarke

Well, I think part of it is because you could make the argument that Jim had been underpaid for the previous years. If you look at the contribution -- and no one’s debating, and we agree with you that if you look at a percentage of revenue going out, because of diversification that you could make the argument and even Jim had said, as you said, on analyst day that he might be less important. However, we think there’s fair value in the contract that we negotiated with Jim and we think that his contributions are fairly compensated at the level that we negotiated. So we’re feeling pretty good about it.

Operator

Your next question comes from Mark May - Needham.

Mark May - Needham

I had three questions. The first one is it looks like financial advertising revenue was up about 4%, 4.5% year over year in the quarter. That’s a little better than I think last quarter, which was about 2% or 2.5% growth.

The question is, based on what you’re seeing right now would you expect to see a similar, worse or better environment in terms of advertising spend from your financial advertisers?

Thomas Clarke

We probably expect to see similar. I say that not knowing where the outside environment, the changing environment that we kind of live in, whether that gets worse or better. But I think, Mark, we may be a little bit unique in that in the sense that for those financial advertisers, they feel that in some cases we’re a must-buy type of site for them. I wouldn’t expect that would get significantly better because of the environment or significantly worse because of it, so I would say that it would be similar.

Mark May - Needham

Second question is Promotions.com. We were estimating that before this quarter, the business was sort of on a run rate quarterly of doing around $2.5 million to $3 million a quarter. Is it fair, based on the comments you made in your prepared remarks that Promotions could get back to that kind of a run rate as early as Q2?

Thomas Clarke

Sure. I mean, we expect that business as we’ve indicated in our prepared remarks that the pipeline is building again. We think that there are opportunities out there that were put to the side because of the fact that we took a lot of their resources and we made a conscious decision to do that. But we think that over time that business will certainly get back to that level of revenue that you just indicated.

Mark May - Needham

Well, it sounds like it’s building a pipeline and over time it will get that but it may not be as early as the current quarter; it may take time to rebuild the pipeline.

Thomas Clarke

You know, it might. We’ve got everybody out there selling. As we said, we’re going to augment that with the hiring of additional salespeople in that business. I can’t say it’s all going to come back in the second quarter, but we certainly expect that business will come back very, very strong.

Mark May - Needham

I don’t know how material of a number this is, but I think you capitalized a decent amount of the costs that went into the site redesign and the site builds and the other things that you’re doing around that area. What impact will that have, Eric, on the depreciation number this year?

Eric Ashman

Certainly what you had was many of these things coming online during the quarter. We reported approximately $1.3 million of depreciation in Q1, which is up 19% sequentially. You’ll see that come up a bit more in the second quarter just to reflect a full quarter’s worth of activity. That represents a significant amount of the investment that will actually hit depreciation and amortization during the year.

We’ll continue to certainly do some capital investment throughout the rest of the year, but you’ll see that’s the major jump that you’ll see in that expense line is between Q4 and Q1.

Operator

Your next question comes from Richard Fetyko - MCF & Company.

Richard Fetyko - MCF & Company

Just to follow-up on Mark’s question on Promotions.com, maybe I’m splitting hairs here, but in the third quarter of ‘07 when Promotions.com was acquired the contribution for two months was $2.3 million. So if I annualize that or quarter that, it’s really in the range of $3 million to $3.5 million. I mean, is that sort of the normalized historical run rate from Promotions.com that we can hopefully get back to at some point?

Eric Ashman

The answer is yes, we do. I mean, keep in mind that there is seasonality in the Promotions business so generally Q3 represents a high watermark for that business because people are spending to build Promotions that actually launch in Q4.

But that aside, the answer is yes. Our expectation, I think Tom really stated this in his comments, we still believe there’s a significant external opportunity for growth for that business and we think they’re back on track in terms of driving towards that growth. So yes.

Richard Fetyko - MCF & Company

With regard to the ad sales group expansion, remind me what was the expansion? Because I thought that you hired quite a few folks late in the fourth quarter. I think you went from, it sounded like from 10 to 15 and then it sounded like you added two more in the first quarter, is that right?

Thomas Clarke

We added a couple more in the first quarter and we continue to look. Our goal is to expand the team. We came in the year at about 15, we’re at approximately 17 people now and we’re expecting to add a couple more in the second and third quarter as well.

Richard Fetyko - MCF & Company

So what’s the typical ramp for an ad salesperson? How long does it take him to get to the quota that you expect him to meet?

Thomas Clarke

It really takes a couple of months. We’re being fortunate right now in that we’re finding people with good experience and so two months is a fairly rapid time for somebody to come up but we’re finding that they’re actually contributing to the business and getting towards that quota number within a couple of months.

So the people that we brought in the first quarter certainly have an impact towards the tail end of the second and the third quarter. The people that we start to bring in now will have a significant impact on Q4.

As a follow up to your earlier question about Promotions, and maybe we didn’t make it clear enough or it didn’t come across as clear enough so I’d like to get clarity out there. I don’t think that you understand how we hurt the business. The decision was that we could go outside, spend more money, not use Promotions and have the development of the sites linger for a while. We thought it was better to get it over with, get it done, put everybody on a common platform and actually do it better and cheaper in the long run and deliver it.

What I really want to say is, we hurt their division. As a CEO you hate to say you pinpoint one division and hurt it, but for the operating managers of that division when we made our decision to really take their resources, we really put them behind the 8-ball. But that’s over. We see the pipeline building, and that’s why when you go out further in the year, we think the margins are going to go higher.

So I just want to make that clear that we consciously made the decision, we evaluated a tremendous number of factors knowing in effect we were going to take their revenue down by doing it but in the long-term interest of the firm and in meeting a demand that we’re seeing in the marketplace, we thought this was absolutely the best decision for us going forward.

Richard Fetyko - MCF & Company

I totally get it, Tom. I liked that business when it was part of iVillage and I think it was a great acquisition for you as well.

The last question with regards to the growth drivers in the ad sales business could you give us some idea as to whether you expect monetization to be the primary driver as we saw in the first quarter or it’ll be the traffic growth?

Thomas Clarke

I think you know, as I said, we’re continuing to evaluate. We’ve got a little bit over two months of data now on the site and patterns and stuff; a little bit less than that with MainStreet, but we think it’s going to be a combination of both. We like the monetization we’re seeing. I think you all know that the new design of the site gives us more ad placements on a page. We said we would get better monetization; we are getting better monetization. We think we’re going to see traffic increase from natural search and the things that we said that the site would deliver. So over time I think it’s going to be a combination of both that we see.

Operator

Your next question comes from Colin Gillis - Canaccord.

Colin Gillis - Canaccord

When I look at the number of new advertisers, I mean that’s obviously a key metric, where are we in the process of having advertisers think of you as a site about money, not just markets and stocks?

Thomas Clarke

I think we’re getting there. I mean we had 32 new advertisers and if you just do the breakdown it was split evenly between financial and non-financial. I think we’re starting to get to the point as MainStreet gets more traffic, as it becomes more well-known, we’ll get to the point where advertisers will look at us as the category of money and not just the financial site that we’re more well-known as. So I think it’s happening; I don’t think we’re there yet.

Eric Ashman

I would just expand on that in that this concept of the custom campaigns that Promotions really helped us develop really plays into that. The biggest areas where those campaigns are successful are actually in non-financial content product categories such as small business and travel. Some of our biggest non-financial advertisers that were on the site in the first quarter came in on custom sponsorship content campaigns that were outside of the financial category. That’s been a big boost for us.

Colin Gillis - Canaccord

Do you think of yourselves as being ahead of the pack in terms of these custom campaigns? Where should we think about the run rate for these new advertisers going forward? I mean is it possible that they keep running at the current levels that you did in the March quarter?

Finally, is having your sites up and the redesigns done now ahead of the competition, does that help you in selling these campaigns?

Thomas Clarke

You have a couple of questions, so I will try to break it out.

Do we think we’re ahead of the pack in some of it? I think that we as a management group, we’ve seen trends earlier than others. I think you could make the argument that we were early with Promotions and then all of a sudden there was a host of publicity, the Booz Allen study about how the fact that marketers and publishers are going to be aligned. I think that comparable evidence is out there that we see some of the trends a little bit earlier. I think we could be a little bit ahead of the trend with Geezeo in the sense of where that whole network and social interface is going to go in terms of all of your financial decision making.

I think having the sites done does position ourselves in a way that gives us some advantages in the marketplace. I think the custom campaigns with Promotions, yes, I do think it’s an advantage and I do think we’re ahead of the curve.

I think what our challenge is right now is to make sure we get back on track with the monetization of all those elements and we start building those pipelines. So we’re feeling very bullish about -- look, the question someone should be asking me is if you had to do it again, would you buy Promotions? The answer would be emphatically yes.

I wholeheartedly believe in that business. I believe in where that business is going. I believe in the attributes it brings to this business and how it really supports us. So I wouldn’t do anything differently. I wish we didn’t have to bring all of their resources to bear to deliver our sites on time, but it is what it is and we’re comfortable with the decision-making process we went through.

Colin Gillis - Canaccord

Where are you seeing video RPMs right now? What was the overall RPM for the quarter?

Eric Ashman

The RPM was $26.84, which is the highest we’ve ever done. Video RPMs is still holding strong. They’re similar to where they’ve been in the past. We used to say they’re one, one-and-a-half times our average sitewide RPM, but that’s when we had a much lower RPM. We are probably running about one-and-a-half to two times that number.

We’re also seeing some very good engagement with video in general on the new site, which is helping because it’s bringing in more advertisers because of the amount of engagement that we’re having and the amount of video feeds that we’re able to deliver.

Colin Gillis - Canaccord

Any feedback from MainStreet and some of the core advertisers that you launched with? It looks like one of those advertisers has expanded their campaign.

Eric Ashman

Yes, we have had an expansion of a campaign on MainStreet. The launch advertisers have been happy, they like what they’re seeing and I think to your point earlier about being in that category of money, for a lot of these people that is going to be something that they’re really going to play us for going forward. So as we continue to build that out it will be important for us.

Colin Gillis - Canaccord

Looks like we got our answer as to whether or not the front page would sell too, right?

Thomas Clarke

Correct.

Operator

Your next question is from Sameet Sinha - JMP.

Sameet Sinha - JMP

So the growth in non-financial advertising, that kind of advertising revenues, that’s slowed down on a year-over-year basis. Could you give us more color on that? We’ve been hearing some initial reports that there was weakness in brand display advertising. Did you see any of that? Like you said, you are still getting there; for financial advertisers you are a must buy but not for the non-financial as yet? Do you think you’re still on track to make advertising 50% of your revenues for 2008?

Thomas Clarke

I think when we talk about non-financial advertisers up 44% year over year, out of the 32 new advertisers we had half of them were non-financial. Maybe I’m not seeing the same trend you’re seeing or indicating with the non-financial piece of it. But I think it’s important to note that we continue to see growth in that non-financial category in the MainStreet and stuff like that and we’ll certainly do that, as Eric indicated. With the small business and travel with the custom ad campaigns, we continue to see growth and all of that is non-financial.

As for weakness in display, again what we’re seeing is we’re seeing it more on the incremental spend than we are on the base spend. So for our advertisers who are coming in who have campaigns that are out there with a base dollar amount spend, we think we’re doing as well as we have in the past in getting there. I think the question is the incremental spend and I think that’s as much a function of the environment of which we’re going to operate as anything.

So we hope that it’s going to come back. We hope we’ll get our fair share of it. But we’re not really seeing a big weakness in display that might be out there.

Eric Ashman

To your last point about the revenue mix, yes, our expectation this year is that we’ll be in that 50/50 range between paid and marketing services.

Sameet Sinha - JMP

In the previous conference call you mentioned that you’re going to ratchet up spending in first quarter and then hold that steady for 2008. Considering the Jim Cramer contract and other things that you see in the business, do you think that’s still feasible?

Eric Ashman

Yes. I think I’d look at it a couple of different ways. Certainly you have to bring into effect the impact of Jim’s contract on the second, third and fourth quarters. That’s why I gave a little bit of additional information with respect to the financial impact of the restricted stock that was granted to him as part of the deal.

That aside, if I just go through the different categories, cost of services throughout the rest of the year, certainly the second quarter will probably come up a little bit off of the first quarter as it trends up with the growth in the business and the shift out of capital projects and the end of some capitalization of projects that these things have launched.

Sales and marketing should stay relatively consistent and constant across the rest of the year. Again, you might see it move a little bit up with the rise in revenue related to things like ad sales, commissions and other variable costs but for the most part, our expectation is that we will maintain spend on the areas such as online and offline marketing to keep those costs in check and to drive some market expansion there.

G&A, excluding the impact of non-cash compensation, I think if you think about the things that I talked about that drove the number up in the first quarter, things such as temporary staffing costs which has come out of the business, things like payroll taxes, which always start at the beginning of the year, our expectation is that those costs will actually trend down throughout the rest of the year.

Sameet Sinha - JMP

You said you would be hiring additional people for Promotions.com. Is that included in the goal to add another two or three salespeople for the overall company for the year?

Thomas Clarke

No, that’s focused on the ad sales business. Also we are focusing on adding a couple of extra salespeople in the Promotions business specifically, because we want people specifically focused on driving that opportunity.

Sameet Sinha - JMP

Could you give us – this might be a fairly new metric -- but what’s the sellthrough rate on the newly created inventory that you have now? You mentioned the total inventory on TheStreet.com website should go up by about 35% with its new design. What’s the sell through rate on the newly created inventory? Because my assumption is since you’re paring down on the number of pages that you’d be selling, this incremental new inventory’s going to be, you assume, high value. So what’s the sellthrough rate on that incremental new inventory?

Eric Ashman

Well, we stopped producing just a general sellthrough rate number in the fourth quarter and part of it was because so much of our inventory now on the network is non-IAD standard. We essentially create it based upon advertiser demand. So, one way to answer your question is as it relates to the custom and high premium, high CPM-type inventory that we create for very specific content-focused campaigns, the sellthrough rate is very high. You can essentially say it’s 100%, because it’s created specifically on the back of working strategically with advertisers to create the campaign for them and then build a mini-site and promotional unit to house that campaign.

We don’t provide sellthrough rate on the rest of the site, but as you can tell from the CPMs that we’re delivering we’re actually doing pretty well in terms of not just overall modernization, but sellthrough as well.

Operator

Your next question comes from George Grose - American Capital Partners.

George Grose - American Capital Partners

If I were to strip out the impact of your acquisitions in the Bankers Financial and Promotions.com which combined for $4.2 million, you would have had about a 2% organic growth year over year, is that correct?

Eric Ashman

Yes. I don’t have those numbers in front of me but you’re doing the right calculations if you’re pulling out Bankers and Promotions.

George Grose - American Capital Partners

In terms of the drivers to the organic growth, if I take away the upside that we could see in Promotions, what would be the category? How would you rank the categories of your different revenue categories there?

Eric Ashman

The way to think about revenue in general is remember, we’re still a business that has a higher weighting on paid services, which is the slow growth part of our business and our marketing services. Which is why the Q1 strategy and our strategy for the past year has been so important, where we’re focused on driving growth opportunities on the ad side of the business which grew by 18% in the first quarter.

So when you think about the sub business that we talked about, the subscription business is a slow growing business for us right now. That’s going to drag down the overall organic internal growth rate, but the real opportunity is going to continue to be on the ad side of the business. That’s why everything that we accomplished in Q1 is so important because that’s what’s going to drive the leverage and the growth through the rest of the year.

Thomas Clarke

George, let me just add a little bit of color to that. I think when you think about this, I think you have to go to the overall strategy of what we’re trying to do. As you know, we are trying to get into the category of money. So if you think about the people that invest, the active investors that are in the market and you think about the people that live on BankingMyWay who are looking for mortgages or loans or credit cards or stuff like that or you’re thinking about people on MainStreet who wonder what to do about life insurance or a job or how to do any of the other things we have out there; that category dwarfs the category of those active investors. Our strategy has always been to go after that.

So if you think about where we are, MainStreet’s coming into its own. BankingMyWay is coming into its own. When you are answering the question about where the importance of where the growth drivers are going to be -- maybe this goes back to Colin’s question a little bit earlier -- this is not a trend we woke up last week and decided to do. This has been in our thinking for probably 12 to 15 months now with the strategy of knowing that we wanted to get into the bigger category of money.

Personal finances, when you think about 401-Ks now, right, pension plans, and what people are going to look for in their 401-Ks going forward, that’s the mindset and the category we’re going after and that’s where the growth is going to be. I think we’re going to be uniquely positioned to go after that as it develops. So that’s more in line with what we’re doing and where we see the growth opportunity building. So think of MainStreet, think of BankingMyWay, think of Promotions as the vehicle that allows us to do the customized ad units for any one or all of our sites that are really going to take advantage of that.

George Grose - American Capital Partners

In Q1 it seems like on the advertising side you saw a similar drop in advertising revenues that you saw in Q3 last year when the advertisers pulled their advertising, but they subsequently came back in Q4. Are we going to see, early on, do you see the same kind of activity here as we enter Q2?

Thomas Clarke

George, I think it’s the same discussion we’ve had many times which is the seasonality of it. You can’t compare a Q1 with a Q4. I mean Q4 historically is the largest advertising quarter of the year and that’s why we try to tend to guide everybody to look at quarter over quarter, year over year because you see the same kind of trends.

So if you looked at where we were year over year it’s fine. Look, our ad business grew 18%. We’re very proud of that. I think if you look in the category, we’re doing as well as maybe some of the other people that are out there. So we expect to continue to drive advertising revenue. It’s a question that Bill Morrison asked earlier on the call. So we expect that advertising number to keep growing and ramping through the year, but we do have seasonality. Second quarter is usually stronger than the first. You have a little weakness again in the third quarter, and then the fourth quarter is when everything usually comes to fruition. So that’s the kind of path we’re on this year.

George Grose - American Capital Partners

I guess with the transition to all things money, when do you expect to start seeing maybe less volatility in the advertising? Do you still see the same seasonality trends there?

Thomas Clarke

Well I think you’re asking me a macro question about the ad market in general and to answer that I would need to have more of an insight into what we’re seeing from the economic front, right? So if we are in recessionary times as has been widely communicated, it’s hard for me to see exactly what that’s going to be. But again, our expectation is we’re going to continue to drive ad revenue quarter to quarter.

Part of that is because if you think about it, personal finance for us has been in the background and now we’re making it an online business. We’re going to take it and make it more relevant for everybody throughout our site. We think that’s going to be a big play, and that’ll start to come into play.

Look, MainStreet, the new site launched in February, MainStreet launched in February. We haven’t even had a full quarter of either one of those sites launching. We reskinned BankingMyWay. I think we’re positioning ourselves for growth throughout the rest of the year.

George Grose - American Capital Partners

The page views, which were down year over year, can you attribute that to the site relaunches?

Thomas Clarke

If you go back to the fourth quarter and even earlier than that, we indicated to everybody that that’s exactly what was going to happen because of the technology we were using and because of the story lengths in the pages, pagination that we were using on the new site to create a better user experience, so we’re not surprised about that. We thought that it would come down. We expect that over time as we tweaked things and stuff that we’ll get that to grow better.

But again, I think someone asked earlier, we’re focused on monetization. We had the greatest monetization we’ve ever had in any quarter, so monetization is always the trump card for us. We think that we’ll get page view growth and monetization to increase over the coming quarters.

Operator

Your next question comes from Richard Fetyko - MCF & Company.

Richard Fetyko - MCF & Company

First of all, I think the year-over-year comparison on an organic basis is a little flawed to the extent that remember some of the print revenue was outsourced so there’s about $700,000 maybe $800,000 maybe $1 million, that was in the first quarter of last year that’s not there this year, if I’m right.

Secondly with regard to BankingMyWay.com, I imagine or I understand that you’re still working on the redesign of that. When will that launch? Do you have any update on BankingMyWay.com? Is that one of the projects that Promotions.com is working on currently?

Eric Ashman

A couple of things. We actually did a pretty significant reskin of the site in the first quarter and that was essentially just to work through and make the site far more useable. It improved the traffic flow through the site, the number of pages that people were consuming on the site. It also refocused on improving advertiser performance, all these things we accomplished in the first quarter.

There are probably a couple of more phases to come. We’re in the middle of a second phase of redesign on the site and the addition of new features and functionality. I think it’s reasonable to expect that you will just see ongoing development on that site throughout the year.

The first thing we’ve been focusing on is fully developing the graphical display model, because it’s a high CPM model. There’s a tremendous amount of opportunity for us in that space alone. Going towards the end of the second quarter and into the third quarter you will see us roll out and begin the development of a hyperlink model as well.

So this will be an ongoing process for us. We’re really pleased with how the site has developed so far, the traffic trends on the site. SEO is starting to ramp up on that site as well. The Bankaholic relationship is working really well for that site. So you’ll see ongoing iteration, but I think as we get the graphical display piece nailed down and really working well, we’ll turn our attention the hyperlink model and you’ll see that a little bit later in the year.

Richard Fetyko - MCF & Company

I’m surprised you say that you’re working on the graphical ad model before the hyperlink model because just considering our experience with BankRate, their CPMs on the hyperlink side are much, much higher -- I mean, $800 to $1,000 effective CPMs versus the sub-$100 CPMs on the graphical side. Why that decision?

Eric Ashman

Well, just because it moves the needle for us much faster. We already have all the capabilities in-house in terms of deploying. We already have the existing graphical advertiser relationships. As long as we have that piece right to sell those high CPM inventory units today and in fact we have, we’ve run a number of campaigns in the first quarter and we’re continuing to sell additional campaigns on an ongoing basis. So it’s merely for us the low-hanging fruit as it relates to the current business that we have and the relationships we have.

Richard Fetyko - MCF & Company

Okay. That makes sense. Any update on the M&A prospects out there in the pipeline?

Thomas Clarke

Well, we remain opportunistic to look at that. As you know, we’ve got a great cash position. We’re seeing some things, we’ve got a couple things in our pipeline. I think we want to make sure that the ones we do the environment is getting a little bit easier for us right now in terms of that so I think there are some opportunities that we’re certainly actively looking at now. We’ll continue to update you as we get them, but other than that, I don’t want to say too much about it.

Richard Fetyko - MCF & Company

I just thought of the other question that I had on the BankingMyWay.com. Part of the lever in this acquisition was the ability to funnel traffic from the flagship website into some of these adjacent sites like BankingMyWay.com. Have you tested some of that already in the quarter? Are you able to drive traffic into BankingMyWay.com from your core sites?

Eric Ashman

We are. You’ll see from time to time we do stories on, for instance, we’ll do stories on TheStreet that are about whether it’s about the sub-prime crisis or banking or interest rates and we use things like BankingMyWay rate tables to push people in. We’ve also done similar things on MainStreet. We’re developing some new widgets and table technology that will make that even more effectively across the network.

We’ve already had some very good results as it relates to stories and content from the different properties. We’ve done the same thing with MainStreet off of TheStreet.com as well and we’ve found that we can actually move the traffic back and forth if we pick the right stories that are appropriate to the audience across the different sites.

Operator

Our next question is a follow-up from Colin Gillis - Canaccord.

Colin Gillis - Canaccord

The investment in Geezeo, would you have done that without the option to buy?

Thomas Clarke

No, we would not have. The option to buy is critical for us. I mean, Colin, as you may remember we have a little bit of experience with this kind of structure. We did the same thing with Stockpickr in the beginning of ‘07 that came on to fruition. We brought the whole thing in. Hopefully Geezeo turns out to be the same type of quantum leap in growth that we expect it to be and without that option to buy we would not have done the deal.

Colin Gillis - Canaccord

Has this basically helped you straddle some of the private valuations that some of these entrepreneurs have in their head versus the amount of risk that you have to bear near term?

Thomas Clarke

That’s an absolute 100% certainty. We need to straddle it because again it’s very difficult, as you know with these fledging businesses that are really starting to incubate up, that the valuations are so high, people have these outlandish price points. For us to get some certainty around what it would cost is very important for us to process. Without that it doesn’t really make a lot of sense for doing it.

We have a very good relationship with the management, we like them as business people and entrepreneurs and we think ultimately should it come to that they would be a good addition to the team.

Colin Gillis - Canaccord

How about the standard banner ad advertising, graphical display advertising campaigns, are you seeing a change in duration that others are seeing? A tightening down of campaign duration?

Thomas Clarke

Colin, I can’t tell you that we are. I’m sure we’re seeing a little of it that maybe is flying a little under the radar of what I look at all the time, but in general, no. We’re just not seeing that right now.

Colin Gillis - Canaccord

Are you seeing a shift away from your standard banners and box ads into more of the interactive?

Thomas Clarke

Absolutely. We’re certainly seeing more and more that advertisers are coming wanting to have something unique, wanting to be interactive, wanting to have these campaigns so from that perspective, yes. That isn’t a new trend, that’s a trend that’s been ongoing for a few quarters now, and what spurred us on to do the Promotions acquisitions in the first place. We thought longer term, and again from the dollar amount in those type of campaigns and what you get from it we thought longer term, that was the genesis of how we were going to raise the revenue per thousand.

Colin Gillis - Canaccord

Could you give us some color about the partnership with CreditCards.com and what that might look like?

Thomas Clarke

Well again, for us right now we want to get additional content on the BankingMyWay site. It drives a little additional traffic. We’re up to all different kinds of conversations with people about successful partnerships that we start out with and how to make that more cognizant for both of us to really benefit from. So it’s kind of early for us to say which way that’s going to go, but we’re very happy with it and it is performing as we thought.

Colin Gillis - Canaccord

Finally, what is the quota that a new salesperson has when you bring them on and how many salespeople do you have?

Thomas Clarke

As Eric said, it’s a couple of months to get them up to it but we’ve been very fortunate in that we’ve been able to get some experienced people and they bring with them some relationships. I appreciate you going down that path.

Operator

Your next question is from Ross Sandler - RBC.

Ross Sandler - RBC

I’m not sure if we may have covered this already, but the 18% ad growth year over year, what was that number organic? If we look at the 4% within the financial services vertical, what would that have been on an organic basis? Thanks.

Eric Ashman

We don’t break out the different properties and where ad revenue comes in across the different properties. Our whole proposition, whenever we launch anything new in the network, whether we acquire it or build it is to leverage the entire ad sales teams so that they’re working one relationship to make multiple sales. When we talk about the 18% it is a network-wide growth rate and we generally don’t break it down any deeper than that.

Operator

There are no more questions in the queue. I’ll turn the call back to management for closing remarks.

Thomas Clarke

Thanks everybody for joining us. I look forward to talking with you again in the future.

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